Suicides Spark Inquiries

Apple, H-P to Examine Asian Supplier After String of Deaths at Factory

ENLARGE

Terry Gou, chairman of Foxconn's Taiwanese parent company Hon Hai Precision, is surrounded by journalists as he arrives for an open visit of the Foxconn plant in Shenzhen Wednesday.
AFP/Getty Images

By

Jason Dean in Beijing and

Ting-I Tsai in Taipei

Updated May 27, 2010 12:01 a.m. ET

Amid a furor over suicides at a major supplier, Apple Inc.,AAPL-0.87%Hewlett-Packard Co.AAPL-0.87% and other electronics companies said they are examining conditions at the Chinese factory and how the supplier has responded to the spate of workers' deaths.

The suicides at Hon Hai Precision Industry Co., which assembles iPads for Apple, computers for H-P and cellphones for Nokia Corp.NOK0.28%, have put unprecedented scrutiny on the secretive company and have highlighted the changing nature of China's work force.

The tech companies' promises to investigate came before another Hon Hai worker died Wednesday in what police said was a suicide, and as the company's hard-charging chairman, Terry Gou, moved to contain the fallout.

Wednesday's incident, reported by state-run Xinhua news agency, marks the 10th time an employee at Hon Hai's sprawling Longhua complex in the southern city of Shenzhen has jumped to his or her death this year, most since April, with two more injured in failed attempts.

Earlier Wednesday, the company gave a group of journalists a tour of Longhua, a walled-off complex with guarded gates and about 400,000 workers, and announced plans to outfit worker dormitories with safety nets to prevent more workers from jumping to their deaths.

"These last two months, I've been afraid to answer the phone late at night or early in the morning, because we've been unable to prevent these incidents from happening," the 59-year-old Mr. Gou told reporters at Longhua, which has dozens of factory buildings and worker dormitories. He expressed "regret" over the incidents, but defended Hon Hai's response. "We need time. But we have confidence and strong determination" to address the problem, he said.

The statements Wednesday from Apple, H-P and others were the first public comment on the suicides by customers of Hon Hai, which also goes by the trade name Foxconn. The Taiwan-based company, which employs some 820,000 workers throughout China, is the world's largest electronics contract manufacturer by revenue.

"We are saddened and upset by the recent suicides at Foxconn," Apple said, adding it had assigned a team to evaluate Hon Hai's efforts to address the suicides. Apple said it's in contact with Hon Hai management and "we believe they are taking this matter very seriously."

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In 2007, Jason Dean scored Mr. Gou's first interview with Western Media since 2002, and toured Hon Hai's massive Shenzhen plant. Read his Page One article.

H-P, the world's biggest PC maker, said it "is investigating the Foxconn practices that may be associated with these tragic events." Nokia said "we have contacted Foxconn to ensure any issues are identified and addressed."

Dell Inc. said, "any reports of poor working conditions in Dell's supply chain are investigated and, if warranted, appropriate action is taken." Other Hon Hai customers, including Motorola Inc. and Nintendo Co., made similar statements.

Such audits generally involve visual checks of the facilities and interviews with employees that companies say are designed to keep them free from management intimidation.

It would be difficult, though not impossible, for companies to extract Hon Hai from their supply chains, and so far none are suggesting that is under consideration. While there are other contract manufacturers, Hon Hai has made itself integral in their manufacturing processes—not to mention its ability to juggle secretive product launches from various clients without divulging secrets.

The deaths at Hon Hai have defied explanation. Their pattern resembles what psychologists call a "suicide cluster," where one suicide triggers copycat acts, sometimes seen in schools or groups of young people.

Other companies have experienced suicide waves. France Télécom SA, which has around 180,000 staffers, has been under scrutiny after 35 suicides in 2008 and 2009, and another 13 this year.

Amid widening public concern, Chinese government officials have said they are looking into the deaths at Hon Hai. But so far authorities have suggested no wrongdoing by the company.

ENLARGE

Labor rights activists say the deaths demonstrate problems with the way Hon Hai treats its staff. Workers are paid a base salary of 900 yuan a month, or about $132, the legal minimum wage, but most work overtime, which can pay 1.5 times or more the standard hourly rate.

Critics say Hon Hai compels or allows employees to work more than the legal number of overtime hours, and that its military-style rigor and repetitive working conditions create excessive stress on workers.

Still, the labor activists say Hon Hai's conditions are better than those at many factories in China, and that conditions have been improving in recent years.

Hon Hai defends its treatment of workers and their working conditions, and says its compensation and overtime practices follow local labor laws and the guidelines of an industry group. The company recently launched a series of antisuicide measures, from establishing a hotline to inviting Buddhist monks to pray for the factory.

"Parents put their children in our hands, and we provide them with work and living conditions, but also hope to give them a favorable mental and physical living environment," Mr. Gau said Wednesday. "We haven't been able to prevent these incidents from happening in the last few months... In the future, we need to do even better."

Li Qiang, executive director of China Labor Watch, a New York-based group, said one problem is the Longhua plant has simply become too large. "These young workers feel like there's no one caring for them," he said. Hon Hai's methods have failed to keep up with changes among the migrant workers who staff coastal factories like Longhua, he says.

Workers at tech firm Foxconn accuse the company's managaement of inhumanity and indifference to working conditions after another employee dies in tenth fall this year.

Mr. Li and other Chinese scholars and labor experts say workers from earlier generations, who hailed mainly from poor farms in China's hinterland, were accustomed to hard farm work and more single-mindedly focused on making money.

"The migrant workers of this generation are so different from earlier generations," says Li Guorui, a psychology professor at East China Normal University in Shanghai. Today's workers are aware of the chasm that separates their lives from the wealth of others in Chinese society.

After 19-year-old Li Hai jumped to his death Tuesday from a fifth-floor window of a training center, police found a suicide note apologizing to his family. The note indicated that Mr. Li had "lost confidence in his future," and that "his expectations of what he could do at work and for his family far outweighed what could be achieved," the Xinhua news agency reported, citing police.

While labor activists refer to Longhua as a sweatshop, it hardly has the look of Dickensian squalor the term connotes. On Wednesday, thousands of workers walked the palm tree-lined streets in colored uniforms bearing identification badges, while others ate in canteens boasting different regional cuisines.

The factory has a hospital and a bookstore. A banner advertised a karaoke contest. Liu Risheng, a 22-year-old employee who stood outside a cafeteria smoking a cigarette, said the pressure was manageable. "People complain from time to time," he said, but "it doesn't affect me much."

Hon Hai's culture is built around the personality of Mr. Gou, who started making television channel-changing knobs with a loan from his mother and built Hon Hai into a titan with more than $60 billion in revenue last year. Mr. Gou combines intense drive with a martial leadership style. In a rare interview in 2007 with The Wall Street Journal, he described Genghis Khan, the 13th-century Mongolian conqueror, as a personal hero, and said "I hate that I [have] become famous."

Some actions taken by Hon Hai have worsened the bad publicity triggered by the suicide wave. Mr. Gou's announcement Wednesday that the company will install 1.5 million square meters of netting around its buildings was construed as a sign that it expects more jumpers. And the chairman was forced to publicly withdraw a letter to employees about the suicides Tuesday that was seen by some as insensitive.

The letter, which the company wanted employees to sign, included a section saying that workers or their families wouldn't sue Hon Hai if a worker died or was injured in a suicide attempt. Mr. Gou said the letter was poorly worded by Hon Hai's legal team.

Apple has been snared in controversy over Hon Hai before. Media reports of poor treatment of Longhua workers in 2006 prompted it to send a team to investigate. It found a handful of violations of its Supplier Code of Conduct, including workers exceeding its recommended 60-hour week, but said overall Hon Hai complied with its guidelines "in the majority of areas." Apple continues to inspect the plant regularly, as it does other suppliers.

Some Chinese analysts say the troubles at Hon Hai illustrate a need for change in how factory workers are treated. Hon Hai "is a microcosm of China's labor system," said Guo Yuhua, a sociology professor at Tsinghua University in Beijing.

—Juliet Ye and Nan Wu in Shenzhen and Justin Scheck in San Francisco contributed to this article.

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